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The connection between Amsterdam’s coffeeshops and organized crime



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May 22nd, 2009 | Last updated: November 30th, 2013


© DutchAmsterdam.nl — The number of coffeeshops in Amsterdam’s Red Light District will be reduced by 34 percent over the next 3-6 years.

The closures are meant to make a dent in the estimated €21 – 42 million in un-taxed, yearly profits made by organized crime syndicates that officials have documented as being involved on the supply side.

The proposed measure, expected to be accepted by the Amsterdam City Council, is part of a large-scale project to clean up and repurpose Amsterdam’s city center.

While Coalition Project 1012 is named after the postal code that covers most of Amsterdam’s city center, efforts appear to be concentrated on the Red Light District.

The project’s stated aims are to

• break the criminal infrastructure,
• diminish the size and and concentration of ‘crimogene functions’1,
• stop and combat the general degradation of the area,
• restore the balance of functions, and
• transform the entire area into a high-quality, diverse ‘Red Carpet’ into the city.

‘Gedogen’ – Holland’s Policy of Tolerance

The final plan provided by Coalition Project 1012 to the City Council states the reason for the proposed closing of 26 coffeeshops is that the large concentration of these establishments in a small area — in combination with many other crimogene functions — form an obstacle for the project’s central goal of breaking the area’s underlying criminal infrastructure.

Crimogene is a term used to describe functions that encourage “promotion or advancement of — or susceptibility to — criminality.” In other words, while the coffeeshops in question are not accused of being involved in any criminal behavior, they’re susceptible to it.

The primary reason for this is the odd situation created by the semi-legal status of coffeeshops throughout the Netherlands. Legally they are allowed to sell soft drugs — even though the sale of any and all drugs is actually still illegal. The Dutch call this approach gedogen a term that does not have an english equivalent. ‘Tolerate’ comes close, but doesn’t quite cover the meaning of the word. In Holland gedogen is used of a situation or activity that technically is illegal, but which is actively tolerated as a matter of government policy. The thinking is: since you cannot eradicate, say, prostitution or drug use, you might as well regulate it.

Holland’s pragmatic approach to selling and using soft drugs is meant primarily to separate the sale and use of hard drugs from that of soft drugs. While marijuna and hash are generally not viewed as so-called gateway drugs — in that they normally do not inspire users to seek out stronger drugs — separating soft drugs users from criminals who would likely push hard drugs was seen as a smart move.

The licensed coffeeshops are subject to a number of rules. For instance, they are not allowed to advertise, or to sell to minors (folks under the age of 18). Too, they can only sell each customer no more than 5 grams, and the shop itself can not stock more than 500 grams.

Also… technically it is illegal for coffeeshops to purchase supplies of the soft drugs they sell — because it is illegal for others to grow, harvest and supply commercial quantities of cannabis and its products. The Dutch refer to this situation as ‘legal front door; illegal back door.’

Organized Crime

It goes without saying that authorities know the shops are being supplied, but the beauty of ‘gedogen’ is that they can close and re-open their eyes at will.

Yet even government policy makers must face facts. After all, the romantic notion that coffeeshops are supplied by well-meaning home growers is a far cry from reality.

Under the ‘gedoog’ principle, home growers in The Netherlands are allowed to have up to five cannabis plants — ostensibly for personal use. As a results of a recent court case, those plants can be any size. However, even home growers with exceptionally green fingers may not have more than 30 grams of cannabis in their possession. At that rate, you’d need a lot of dedicated home growers to supply all of Amsterdam’s coffee shops.

Overs the years, weed-growing operations have graduated from small-time operations in attics and spare rooms to increasingly professional entreprises set up in abandoned barns, in forests, and even in public housing rented — with fake credentials — just for that purpose.

Still, tighter rules, new laws and increased police vigilance have made it much more difficult for small-time growers to operate. Amsterdammers, for instance, are used to seeing police helicopters — manned and unmanned — hover over neighborhoods; either locating high energy use with infrared cameras, or literally sniffing out the tell-tale smell of cannabis with a drone.

According to criminologist Henk van de Bunt, each year during the past few years, five- to six thousand weed growing operations are dismantled by Dutch police.

Coffeeshops have therefore more or less been forced to deal with criminal organizations whose large scale growing- and smuggling operations guarantee a steady supply.

Money, Money, Money

Authorities know this supply comes from so-called safehouses. However, reliable figures are hard to come by. Various reports published over the past few years mention a yearly turnover for all coffeeshops in the Netherlands of between €211 and 283 million. The average turnover per coffeeshop in the Netherlands is estimated to be between €280.000 and 380.000 a year.

Naturally, the profits of coffeeshops are subject to taxes. However, precise amounts can not be calculated since tax authorities can not verify supplies received from the illegal suppliers. Moreover, since supplying cannabis products in commercial quantities is illegal, a judge has determined that tax authorities are not allowed to charge tax over the profits made on these supplies. That means the entire coffeeshop industry does not pay any tax other than tax charged for the sale of legal, secondary products such as coffee, espresso, sandwiches and fruit juices.

Tax authorities do say they believe the profit margin to be 100 percent. That would mean coffeeshops are buying a minimum of €106 – 142 million of weed and hash from supplies who in turn do not pay any taxes either.

According to the tax authorities, the turnover for coffeeshops in the 1012 postal code of Amsterdam is quite a bit higher than the national average. They estimate a yearly turnover of €840.000 — which translates into €28 million a year for those coffeeshops. These estimates do not include the sale of drinks and food. Also, according to the Coalition Project 1012 report, since the suppliers are not known and their administration can therefore not be checked, it is estimated that the coffeeshops report merely one-third to two-third of their actual turnover.

That means the actual turnover in postal code 1012 is somewhere between €42 million and €84 million a year, which means the illegal suppliers turn over between €21 million and €42 million a year.

Most of the hash was smuggled into the country by organized criminal gangs. The weed is supplied largely by Netherlands-based crime syndicates and large-scale home growers. According to the report, home growers often have their seeds and growing equipment supplied by go-betweens who work for criminal organizations and are involved in supplying the coffeeshops.

In this way, coffeeshops form the legal retail channels for organized criminal entreprises. There is a very real risk, according to the report, that the suppliers launder their money by investing in companies — particularly in horeca and real estate — within the same district in which, after all, a criminal infrastructure already exists.

Closing Coffeeshops

In 1997, Amsterdam was home to 350 coffeeshops. Currently 226 are still in business.

In some areas of town, in which there is too high a concentration of coffeeshops, a die-off policy is applied. Coffeeshops in that area may not be transfered to a new owner. If the owner goes out of business, for whatever reason, the coffeeshop permit is withdrawn.

Over the years, a good many coffeeshops have seen their permit withdrawn because they violated the ‘gedoog’ criteria.

In the 1012 district, the City is not willing to wait for the die-off policy to take its natural course. It has therefore opted to withdraw the permits of a certain number of coffeeshops.

These shops affected were not individually targeted. Instead, the Coalition Project 1012 has decided to approach the districts renewal and repurposing by targeting specific streets. By changing the economic infrastructure of these streets, the project leaders hope to stop and turn around the degradation of the entire area.

Among other things, targeting streets instead of individual businesses gives the City a better legal basis from which to apply its plan. This approach also provides the best opportunity to attract new, more desirable economic functions — including high class stores, fashion and art galleries and upscale restaurants.

The project leaders reiterate that it is not the City’s intention to gentrify the area, but rather to make sure the gradual degradation is reversed — in large part by taking away the profit incentive that has attracted 16+ criminal gangs to the district.

Notes:

  1. ‘crimogene’ is a term used to describe functions that encourage ‘promotion or advancement of — or susceptibility to — criminality.’ More
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